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One of the hit movies of 1997 wasWag the Dog, the tale of a White House spin doctor who invents a war to distract the public from a scandal. Last week, our scandal-plagued president premiered the sequel, Wag the Smokestack, a cloaking strategy with consequences for the electric utility, coal, and railroad industries.

In a speech on climate change, President Barack Obama singled out coal for especially rigorous regulatory treatment. Electric utilities, which already were in the process of shutting down 20% of their existing coal-generation units in anticipation of punitive regulatory penalties, suddenly are faced with the possibility that plans for new, more efficient coal plants might have to be abandoned. Railroad executives likewise shuddered because 20% of their revenue in 2012 came from hauling coal.

Natural gas seems to have gotten a big boost from the president. He lauded it nine times. In an accompanying Action Plan, Obama described natural gas as "a critical bridge fuel for many countries as the world transitions to even cleaner sources of energy." The Action Plan says, "Going forward, we will promote fuel-switching from coal to gas for electricity production."

If Obama truly were sincere about dramatically reducing carbon -- rather than trying, Soviet style, to centrally plan the U.S. energy sector into one dominated by windmills and solar panels -- then he would encourage even more gas production. This would involve opening up federal lands to fracking. Energy policy expert Ken Glozer, president of OMB Professionals, notes that the president's Action Plan ignores this market-based solution.

THE CLIMATE-CHANGE SPEECH was typical of Obama's oratory: long on lofty goals but short on the specific means of achieving them. Those bedeviling details will come from various department and agency bureaucrats over the next two years, most notably in September with the Environmental Protection Agency's final proposal to limit carbon emissions from new power plants. Obama last week ordered the EPA to draw up a similar scheme for regulating existing power plants, the details of which probably won't be clear until 2014.

This long, drawn-out rule-making process creates anxiety and uncertainty for all the stakeholders, including utilities, investors, and state regulators. They have been assuming a specific glide path toward reduced emissions over a five-to-10-year period. Power producers two years ago began taking strategic steps that involved considerable costs, like converting some coal plants to natural gas. Now the industry is questioning whether the rules have now changed.

The coal industry is also running into intense local opposition to building export terminals on the West Coast to serve Asia. All of which suggests that a rebound for the
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One bright spot in Obama's proposal is his instruction to the bureaucrats to streamline the permitting process for upgrading and expanding the nation's aging electric grid. Bureaucratic inertia, says Quin Shea of the Edison Electric Institute, has been a major obstacle. "Many projects have failed to move forward because you could not get four agencies to agree on the shape of the table. Now we have a White House that is interested in fixing the problem," he said. Grid modernization is needed not only to replace aging lines but also to move wind and solar power into urban markets.